State insurer may need legislative approval for increases

Wednesday

Apr 17, 2013 at 7:06 PM

BATON ROUGE — Citizens Insurance Corp., the state's insurer of last resort, would have to seek approval from the Legislature's insurance committees whenever it wants to increase rates by more than 25 percent, according to a bill a panel of senators advanced Wednesday.

Jeremy AlfordCapitol Correspondent

BATON ROUGE — Citizens Insurance Corp., the state's insurer of last resort, would have to seek approval from the Legislature's insurance committees whenever it wants to increase rates by more than 25 percent, according to a bill a panel of senators advanced Wednesday. Sen. Bret Allain, R-Franklin, said he introduced the oversight measure in reaction to the move by Citizens last year to raise wind and hail premiums by double and triple digits. In his native St. Mary Parish, rates skyrocketed by 171 percent. There was a “human toll” resulting from the decision, he told members of the Senate Insurance Committee, describing an elderly constituent whose husband had died just prior to her increase notice arriving in the mail.“She called me in tears,” Allain said. “She was deciding whether to buy insurance or food.” In Terrebonne Parish, a 52 percent increase was implemented. In Lafourche Parish, it was 47 percent.Jim Napper, Treasurer John Kennedy's proxy on Citizens' board of directors, said some areas approached 300 percent, while the statewide average was between 52 percent and 57 percent. Citizens is state mandated to be more costly than private property insurance companies because by law it must charge 10 percent more than the actuarial rate — the estimated cost of future potential losses — or the high end of whatever private insurance companies are writing in the region.If future increases are greater than 25 percent in any particular parish, Allain's Senate Bill 19 would give the House and Senate insurance committees approval authority. If the committees move forward with such a request, the bill also gives Citizens the authority to implement the increase over two to five years. Allain said he urged Citizens' board in 2012 to stagger its increases in such fashion, but he added insurance officials told him they were unsure whether the law allowed premiums to be spread out over several years. Sen. Karen Carter Peterson, D-New Orleans, questioned why the legislation included 25 percent when it could have just as easily required legislative approval for 10 percent or another lower figure. “I think it warrants analysis,” she said. Allain responded that he “wanted to give this the maximum chance of getting through” the regular session without major opposition.Testifying on behalf of the bill, Rep. Joe Harrison, R-Napoleonville, told committee members he has received “hundreds of calls” from concerned constituents. “House are being abandoned, and they can't be sold. Nobody wants to pay the insurance,” he said. “That's a very sad commentary on where we are today. But we're there.”Moving forward, Harrison suggested the Legislature study better ways for Citizens to manage risk. Napper said if Allain's bill had been in effect last year, the board could have found a more efficient and fairer way to deal with the premium changes.“We had no devices to lessen the impact of this giant increase,” he said.Should there be an instance under the bill where the legislative committees reject a proposed increase from Citizens, Napper said there is an emergency protocol that would kick in, and the revenues needed would be found. Such a protocol was put into action in the wake of hurricanes Katrina and Rita in 2005, he said. When the increases were announced last year, Kennedy called them illegal because private companies are not writing wind and hail coverage in coastal parishes, but Attorney General Buddy Caldwell issued an opinion clearing the way for the hike. In response, Insurance Commissioner Jim Donelon said at the time that his department has a responsibility to make sure Citizens does not become an attractive product for property owners, while officials with Citizens argued their wind policies, in particular, had long been underpriced.If adopted by the Legislature and enacted, Senate Bill 19 would go into effect Aug. 1.The legislation, approved unanimously by the Senate Insurance Committee Wednesday, now heads to the full Senate for further consideration.